Improving resilience requires banks to push for a rapid restructuring/disposal of non-performing loans (NPLs) to pre-crisis levels, increase cost efficiency, review their business models, accelerate their digital transformation agenda and invest in a greener ‘new reality’. This all in an effort to boost profitability to levels that will enable them to retain earnings to increase capital buffers and to improve their access to capital markets.
This may sound easier said than done. However COVID-19 can work as an accelerator for initiatives already set in motion. Client interaction has been largely digital during lockdowns and banks need their current digitalization efforts to pay off sooner rather than later. Increased client willingness to adopt digital interaction in combination with different functioning of banks’ branch network may lead to a positive business case the bank which benefits can be earlier realized. For a time, the immediate health and economic crisis pushed the sustainability agenda to the back-burner. However, we believe that — in the “new reality” of the post-COVID world — environmental, social and governance (ESG) will increasingly become central to the economic equation. If future growth will be largely determined by an ability to anticipate and navigate the shift to a low-carbon, clean technology economy, then business opportunities arise for banks to fulfill the role of funding provider and intermediary.